Can Credit Card Companies Slash My Credit Limit Without Warning?

If you use credit cards, chances are, you’re familiar with your credit card limit, or the balance you can carry on your card at any given time. If you’re not sure what your credit limit is, call your credit card company or check your most recent statement.

But what if your credit card company decides to cut your credit limit without warning suddenly? Is there anything you can do, or are you just stuck? And what can cause a sudden decrease in your credit limit?

We break down the ins and outs of any unexpected changes in your credit limit, and how to deal with it if your credit card company slashes your credit card limit without warning.

How Do Credit Card Companies Determine Your Credit Limit?

There are several factors that determine your credit card limit. First, the type of card plays a major role. Some credit cards only allow a standard credit limit across the board, regardless of the cardholder’s credit score, income, etc.

Other cards may only allow a range when it comes to credit limits, so cardholders with lower incomes, credit scores, and worse credit histories would be on the lower end of the range, while cardholders who are more qualified would get the higher credit limits still in that range.

Other factors that determine your credit limit include your income, your debt-to-income ratio, your credit history, and other credit cards you have, as well as their limits. ​​

Can They Cut My Limit Without Warning?

Credit card companies can slash your credit limit for a variety of reasons. While the Credit Card Accountability Responsibility and Disclosure Act of 2009 does set protections for cardholders, such as limited interest rate hikes and the right to opt out of major changes to their accounts, it still allows credit card companies to cut credit limits without warning.

If you fall behind on payments or your debt increases to what the credit card company deems risky, they can cut your credit limit to try to negate their risk. They can also cut your credit limit if you start spending more than normal, or at different types of stores.

Anytime a credit card company suspects that you may not be able to pay back when you’re borrowing, they can cut your limit to prevent you from spending more. Also worth noting: If probably says in the fine print of your credit card agreement that the company can decrease your credit limit.

If you rely on your credit cards to pay important monthly bills, a sudden decrease in available credit can pose a very serious problem. A sudden decrease in credit can also have another negative impact on your financial life: It can affect your debt-to-income ratio, which is a significant factor in determining your credit score.

What Should I Do If This Happens?

If your credit card company does suddenly cut your credit limit, you have a few courses of action you can take. First, you can call customer service and (politely) argue your case. Bring up any marks in your favor, like a good payment history, high credit score, or healthy income, and request for your credit limit to be reinstated to its previous limit.

However, this may not work, and you may be forced to accept the new credit limit or transfer your balance to a different card. You should also ask why your credit limit was decreased so you can be sure to avoid these actions in the future.

Keep in mind that the opposite can also happen: Your credit card company can also increase your credit limit if you prove to be a responsible credit card user and always make your monthly payments on time. You can also request a credit limit increase if you are not automatically granted one with responsible credit card use over time.

Why You Should Stay Well Below Your Limit

It’s important to remember that just because you have the available credit or get a credit limit increase does not mean you should use it.

Experts suggest using no more of 30 percent of your available credit on your card, also called your credit utilization. It’s important to keep an eye on your credit utilization, as it makes up 30 percent of your overall credit score, along with other factors like payment history, the age of credit, the mix of credit, and credit inquiries.

Remember that everything you put on your credit card, you will have to pay back, with interest eventually. (Unless you have a 0 percent interest credit card, but those are usually promotional offers and last only a specified amount of time.)

Using credit cards successfully and dealing with sudden changes to your account can be tough. But if you do it right, credit cards can be a valuable financial tool.